EU Takes Action On Cross Border Mediation And Claims

by Ulrika Lomas, LawAndTax-News.com, Brussels

27 July 2011

The European Commission (EC) is to take further action to ensure the application of the European Union (EU) Mediation Directive to resolve cross-border disputes, whilst also proposing to introduce a new Europe-wide preservation order to ease the recovery of cross-border debts.

The EC has pointed out that intra-EU cross-border legal cases are particularly complex due to different national laws and practical matters like language, such that settling disputes and disagreements through courts is often costly and time-consuming. According to an EU-funded study, the time wasted by not using mediation is estimated at an average of between 331 and 446 extra days in the EU, with extra legal costs ranging from EUR12,471 (USD17,900) to EUR13,738 per case.

The European Union Mediation Directive, adopted in May 2008 and in force since May 21, 2011, applies when two parties who are involved in a cross-border dispute voluntarily agree to settle their dispute using an impartial mediator.

A crucial element in any mediation is trust in the process, especially when two parties come from different countries. EU rules therefore encourage member states to provide quality control, establish codes of conduct and offer training to mediators to make sure there is an effective mediation system in place.

All EU member states should now have the measures in place to transpose the EU legislation, but nine countries have not yet notified all national measures needed to fully implement the Directive. As a result, the EC has begun legal proceedings by sending “letters of formal notice” to the following countries: the Czech Republic, Spain, France, Cyprus, Luxembourg, the Netherlands, Finland, Slovakia and the United Kingdom. The countries have two months to respond.

"Access to justice is a cornerstone of the European area of justice," said Vice-President Viviane Reding, the Commissioner for Justice. "Mediation is an important alternative to going to court in cross-border disputes and can help parties find an amicable settlement. I call on the remaining nine member states to urgently finalize transposition so that citizens and businesses can fully enjoy their rights."

In addition, the EC has found that around 1m small businesses in the EU face problems with cross-border debts and up to EUR600m a year in debt is unnecessarily written off because businesses find it too daunting to pursue lawsuits in foreign countries. Typical problems range from differences in national law to the costs of hiring an additional lawyer and translating documents. Individuals face similar difficulties when seeking to get their money back from a rogue trader or maintenance defaulter in another EU country.

The EC has therefore proposed a new European Account Preservation Order (EAPO) to ease the recovery of cross-border debts for both citizens and businesses. Its legislative initiative aims to give creditors more certainty about recovering their debt, thereby increasing confidence in trading within the EU’s single market.

The new regulation would allow creditors to preserve the amount owed in a debtor's bank account under the same conditions in all EU member states. It would only apply to cross-border cases, and could be of crucial importance in debt recovery proceedings because it would prevent debtors from removing or dissipating their assets during the time it takes to obtain and enforce a judgment on the merits. It would raise the prospects of successfully recovering cross-border debt.

The new procedure would be an interim protection procedure. To actually get hold of the money, the creditor would have to obtain a final judgment on the case in accordance with national law or by using one of the simplified European procedures, such as the European Small Claims Procedure.

The instrument would provide common rules relating to jurisdiction, conditions and procedure for issuing an order; a disclosure order relating to bank accounts; how it should be enforced by national courts and authorities; and remedies for the debtor and other elements of defendant protection.

“I want to make recovering cross-border debts as easy as recovering debts domestically," added Reding. "Businesses need a simple solution – an account preservation order effective Europe-wide – so that the money stays where it is until a court has taken a decision on the repayment of the funds. In these difficult economic times, companies need quick answers. Every euro counts, especially for small businesses.”

The proposed EAPO will now pass to the European Parliament and the Council of the EU for adoption under the ordinary legislative procedure and by qualified majority.

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